Mar 8 2017, 12:34 PM
QUOTE(Boon3 @ Mar 8 2017, 09:52 AM)
OK.
Give simple example
Take the first one.
RSI.
It just measures the relative strength of the stock based on the days set in the parameter of the indicator.
In most cases, the period is set to 14 days.
Very basic stuff la...
nothing geng.
Now what most people tend to do is...
they look at this indicator to see if the stock is overbought/oversold.
In which, you will see many beginners screaming rsi oversold la... time to buy.
or when it's overbought, it's time to sell... etc etc.
Generally, it's ok but the number of failed instances is far too many.
ie. the EXTREMES.
The EXTREMES is where one make or break really.
For in the EXTREMES of the RSI indicator, this is where we get the 'rolling down the hill' stocks...
or the forever flying stocks.
so if one gets their tails up and simply go ga-ga once the RSI indicator flashes its alerts...
one will surely lose out....
in the 'rolling down the hill' instances...
one could end up buying early...
only to see the stock continue sinking after one bought....
example? err.... the ONG sector.
if one gets kiasu...
and jumps the gun selling once the rsi shows overbought...
one would definitely miss out on the multi baggers.
however.... having said all that ayam...
for beginning charting...
it's ok la.
just don't over rely too much on any indicators...
it's like using financial ratios...
like PER....
I am sure you understand you cannot over rely on it too... yes?
and sometimes using PE alone... it's also risky.
Nice, a topic solely for trading? Great! Give simple example
Take the first one.
RSI.
It just measures the relative strength of the stock based on the days set in the parameter of the indicator.
In most cases, the period is set to 14 days.
Very basic stuff la...
nothing geng.
Now what most people tend to do is...
they look at this indicator to see if the stock is overbought/oversold.
In which, you will see many beginners screaming rsi oversold la... time to buy.
or when it's overbought, it's time to sell... etc etc.
Generally, it's ok but the number of failed instances is far too many.
ie. the EXTREMES.
The EXTREMES is where one make or break really.
For in the EXTREMES of the RSI indicator, this is where we get the 'rolling down the hill' stocks...
or the forever flying stocks.
so if one gets their tails up and simply go ga-ga once the RSI indicator flashes its alerts...
one will surely lose out....
in the 'rolling down the hill' instances...
one could end up buying early...
only to see the stock continue sinking after one bought....
example? err.... the ONG sector.
if one gets kiasu...
and jumps the gun selling once the rsi shows overbought...
one would definitely miss out on the multi baggers.
however.... having said all that ayam...
for beginning charting...
it's ok la.
just don't over rely too much on any indicators...
it's like using financial ratios...
like PER....
I am sure you understand you cannot over rely on it too... yes?
and sometimes using PE alone... it's also risky.
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Yeah, sometimes we as traders or even investors could not just rely a lot on the indicators. Indicators are just merely used for the sake of emotion during trading, psychological behaviour would be best described if one is solely using TA.
However, just from my point view, in more advanced markets like UK and US, it could be proven that this method is workable since most of their trades are filled via high frequency trading using some bunch of algorithms. Especially if we can see it from indices or futures for example, it is basically a wash, rinse, repeat scenario. Some charts could be proven nearly a success while others do not (who was it that pull out that we are in a 1929 style of recession graph, where is it?). Personally, I never used the RSI as sometimes it could be just a paradox to investors and it is not proven. One needs like few indicators to confirm whether the sideways graph is about the break upwards or downwards, add in Fibonacci, MACD etc. Never liked using RSI during intra-day trade, for long-termers it's okay.
Also, on the PER, always do not like it when using it from the past, for example on UMW when oil prices were so excellent. Rio Tinto when they were at the top of the world when mining earnings were off the chart, it's different now. As an alternative, using PER is useful only when looking forward how it will be 5 years on. But usually stocks best for trading should rely both fundamental futures and the technical chart for best picks.
Now do not assume whatever I said is right, somewhere here could go wrong...
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